The Bankwatch

Tracking the consumer evolution of financial services

Social computing/ finance definitions and potential success criteria

The conversation in the comments surrounding the Zopa post make me thing even more about why its important. 

First some definitions from the experts.

Benjamin at Forrester defines Social Computing — a social structure in which technology puts power in the hands of communities, not institutions.

Jim Bruene at NetBanker defines Social Personal Finance:  – Sharing personal finance questions with others in a defined online community

I believe as do these folks, that social finance will change Banks and financial services.  We can debate the degree of change and the timing, but change will nevertheless happen.  For me part of the conversation lies in identification of the drivers of change;  those core elements that represent tipping points taking the industry in a different direction.  I see one core element within both definitions, that embodies social interaction.  This implies direct contact of some nature, hence the debate my post created.

Its always hard to determine cause and effect, and easy to confuse them.  For example, I have spoken in this blog about dis-aggregation of financial services, but i see that as more of an effect, that arises because they can be dis-aggregated, and re-aggregated in other ways, within new networks.

Social Finance is a driver in my view.  It is basic to human nature.  Internet and modern Web 2.0 tools merely provide a platform for such natural activities to occur.  So when I use examples in defining Social Finance, I want to try to be laser clear on what that means.  Social Finance successes and failures will be defined by the participants, and generally Banks would prefer if it just went away. 

In reviewing results from players in Social Finance, I think we should be looking at the execution of Social Finance, and attributing the results to that execution.  This requires a more detailed analysis at times of the execution, so that we can properly attribute value created.

Examples of potential outputs that could define Social Finance / Computing success:

  1. interest rates – better or worse for borrowers, and lenders
  2. customer engagement – mass or niche – will this be a long tail impact or more broad
  3. Bank participation – customer loyalties are being swayed by the social finance
  4. Scale – gain the process, and coverage benefits that other ecommerce sites have developed, and eliminated, or at least dramatically reduced the manual verification costs, normally associated with lending
  5. consolidation – to what extent that social finance operations are consolidated and integrated, eg Virgin Finance and Circlelending
  6. horizontal integration – social finance integration with other services, beyond finance, eg social networks, reputation management systems, financial planning

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Written by Colin Henderson

July 17, 2007 at 11:41

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